Creative Technology shot to the top of the Singapore Exchange’s gainers list on Monday (March 5) morning, after glowing reports about the potential of the mainboard-listed consumer technology company’s “3D audio” product.
The counter went into the mid-day trading break at a level not seen since mid-2007.
It was up by S$2.26, or 44.1 per cent, at S$7.39, on a volume of roughly 4.4 million shares.
Stock watchers enjoyed a brief stint as technology reviewers last week at a showcase of the company’s new Super X-Fi, which can plug into devices to deliver a listening experience that mimics how people hear in real life.
DBS analyst Sachin Mittal wrote in a March 1 report that the Super X-Fi technology “could be a much needed lifeline for the company”.
Creative most recently posted a second-quarter net loss of US$4.2 million for the three months to Dec 31, 2017, on a 6 per cent year-on-year dip in revenue to US$20.9 million.
“New product lines would further offset losses in existing products,” said Mr Mittal, who noted that Creative’s sound products, which make up the bulk of its turnover, have come under pressure from new premium competitors and cheaper Chinese-made alternatives.
A Super X-Fi dongle is expected to be released in mid-2018 at a retail price of US$150. Creative also plans to launch a free application with limited functionality and to license the technology to other industry players.
CGS-CIMB analysts Yeo Zhi Bin and William Tng wrote, also on March 1: “We believe that Creative’s strategy in rolling out its latest technology is a reflection of its previous painful lessons. By possessively keeping the Sound Blaster technology in-house, Creative invited competition to fill the gap. Hence, Creative has learnt that it is not able to do everything on its own.”
Creative had previously made its mark on the technology space with its Sound Blaster audio processing card, which was a staple of personal computers in the 1990s.
The share price rally began on Feb 23, when the stock more than doubled in value, prompting a Singapore Exchange query.
This was on the heels of a Business Times article about how US$100 million in research and development spending had yielded the Super X-Fi technology.
DBS’s Mr Mittal pegged Creative’s base-case valuation at S$5.56 a share, with a bear-case valuation of S$3.01 and a bull-case valuation of S$8.10.
Meanwhile, the CGS-CIMB team noted that Creative is trading at a price-to-sales ratio of 2.9 times, against the ratio of 2.5 times for the small to mid-cap technology stocks under coverage, and a ratio of 10.3 times for Hong Kong-listed giant Razer.
CGS-CIMB’s Mr Yeo told The Business Times on Monday: “If a competitor suddenly announced a competing technology, this whole euphoria could quickly evaporate, just as rapidly as it was built up.
“On the other hand, if Creative manages to execute, then the sky is the limit, as we have seen from the other tech giants.”